One of the largest shareholders of the London Stock Exchange Group has backed additional spending to address long-standing issues with its new $ 27 billion purchase of Refinitiv, saying the group should invest ‘more and sooner if necessary’ .
Lindsell Train, which owns the largest stake of a fund manager in the group, told investors it was important to “not lose sight of the strategic advantage of the transaction” after LSE shares had gone. lost a fifth of their value last month.
Investors have restless about the impact of Refinitiv after LSE said in March it would incur higher than expected upfront expenses to integrate the data and trading provider, and prepare for the sale of Borsa Italiana to Euronext.
This unexpected announcement sparked the biggest one day fall in LSE shares in 20 years.
The purchase of Refinitiv, the largest in the history of the exchange, transformed LSE into one of the world’s largest providers of market infrastructure and financial data, and one of the most valuable on the FTSE 100.
Suddenly, the operation tripled the group’s income and multiplied by five the number of employees to more than 25,000.
The purchase of Refinitiv meant taking over a company that lose regularly some of its market share over the past decade to Bloomberg and smaller, more nimble competitors such as FactSet and S&P Global Market Intelligence. Last week a major failure at Refinitiv made their Eikon data terminals unavailable for several hours.
Annual results last month showed LSE would spend £ 1bn this year – £ 850m in capital spending and £ 150m in operating expenses – which analysts said would meet financial targets of the agreement.
Lindsell Train has a 4.2% stake. The biggest titles belong to consortia led by Blackstone, Thomson Reuters and the Qatar sovereign wealth fund.
In a meeting with shareholders following the release of the exchange results, Lindsell Train said LSE management acknowledged that they knew Refinitiv would need investment when working on the deal in 2019. .
“Part of the investment thesis was based on the knowledge that Thomson Reuters had under-invested in certain areas. Considering the scale of the business and its complexity, this would always require heavy loads, ”said Nick Train, co-founder of Lindsell Train. His comments were published in a monthly disclosure to investors.
LSE stocks have remained at the heart of Lindsell Train’s UK portfolios due to “the scarcity of such significant data activity globally in the context of the UK stock market,” he said. The fund house said it would not add any further comments. The LSE said its previous market guidance on spending remained unchanged.
LSE shares rallied this month, with analysts saying higher costs have now factored into market expectations.